ConDig (09-May-17). Profit at LGI Homes edged up in the first quarter of this year as the Woodlands, Texas-based entry-level homebuilder posted a 0.3% increase in revenue.
Net income in the quarter ended March 31 was $11.8 million compared with $11.7 million in the same period last year.
It comes as revenue rose 0.3% to $162.9 million from $162.4 million in the year-ago period, while the average home sales price increased 11.2% to $214,075.
LGI said that the rise in home sales revenue was driven by a pick up in the average home sales price, which was offset by a decrease in the number of homes closed.
Home closings dropped 9.8% to 761 homes compared with 844 closings in the same period last year, while the backlog of homes was 1,087 compared with 814 a year earlier.
The drop in the number of homes closed was primarily due to lower home closings in certain communities related to the timing of available land and direct construction inventory and lower backlog at the beginning of the quarter, the company noted.
LGI forecast that it will have between 75 and 80 active selling communities at the end of this year, close more than 4,700 homes, and generate basic earnings per share between $4.00 and $4.50 per share.
The company also expects that the average home sales price this year will be between $210,000 and $220,000, assuming that general economic conditions, including interest rates and mortgage availability, in the remainder of 2017 are similar to those in the first quarter of 2017.
It also depends on average home sales prices, construction costs, availability of land, land development costs and overall absorption rates for the year being in-line with the company’s recent experience.
Strong market conditions continue to support earnings at many US homebuilders amid robust demand and languishing inventory levels, while mortgage rates remain near historic lows despite recent moves higher.
But there are concerns that growth in the housing sector this year could be dogged by further rises in mortgage rates that could leave many price-sensitive first-time buyers on the sidelines of the market, while labor and material costs continue to be elevated.
Latest Commerce Department figures show that housing starts dropped 6.8% in March to a seasonally adjusted annual rate of 1.215 million, but were still up 9.2% on the year-ago period of 1.113 million.